National Check Professional (NCP) Certification Practice Test

What action must a Claimant take if a Cashiers Check is presented by a HIDC?

1. Issue a new check to the HIDC

2. Refund payment to the obligated bank if the check is paid

3. Destroy the Cashiers Check

4. Transfer funds to a shared account

The correct answer is: Refund payment to the obligated bank if the check is paid

When a Cashier's Check is presented by a holder in due course (HIDC), the Claimant must refund payment to the obligated bank if the check is paid. This is because a Cashier's Check is a negotiable instrument that represents a guarantee of payment from the bank itself. The HIDC is someone who has obtained the check in good faith, for value, and without notice of any claim or defense against it. When the HIDC presents the Cashier's Check, the Claimant has an obligation to ensure that the payment is honored. If the Cashier's Check is valid when presented and the bank processes it, the Claimant must refund the amount to the bank that honored the check. This action is in alignment with the principles of holder in due course status, where the HIDC is afforded protections under the Uniform Commercial Code (UCC), entitling them to receive payment regardless of any disputes that may exist between the original parties involved in the transaction. The Claimant essentially must uphold their end of the agreement by ensuring the check is honored, thereby resulting in the obligation to refund if the check has been paid.